How does the Government of Ontario’s Fall Economic Statement Impact Engineering?
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On November 15, the Government of Ontario released its 2018 Fall Economic Statement outlining a $500 million decrease in the province’s deficit to $14.5 billion since taking power. Finance Minister Victor Fedeli also highlighted the government’s commitment to returning the province to a balanced budget but did not outline exactly how long that will take.
The Ford government made the following announcements on three policy files that require the expertise of engineers:
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ENERGY
Government announcement:
- Launch a public review of current electricity prices for industrial users
- Support the consolidation of the electricity distribution sector by extending the two time-limited transfer tax incentives which where scheduled to expire on December 31, 2018
OSPE supports these measures outlined in the Fall Economic Statement, as the current retail electricity price plans contribute to growing amounts of surplus emission-free electricity that is inefficiently discarded (wasted).
There is one serious public policy matter the government is currently not focusing on: the expiry of the Fair Hydro Plan for residential and small commercial consumers at the end of 2021, just before the next provincial election. This may seem far away on political calendars but any major changes to the electricity system rates will take 2 to 3 years to find an acceptable long-term solution. The Fair Hydro Plan deferral account is growing faster than originally projected and is hidden from the public’s view until it expires. Larger than expected cost transfers are flowing into the deferral account. The existing 2017 Long-Term Energy Plan forecasted residential and small commercial rates to rise about 8 per cent per year for three years after the Fair Hydro Plan expires. The larger deferral account will require rates to rise even faster or longer than forecasted. That will create a major political crisis for the government in 2022 unless solutions are investigated now to fix this growing problem before the end of 2021.
The September 2018 Independent Electricity Systems Operator (IESO) forecasts show electricity sector emissions rising after the retirement of 3,000 MW of Pickering nuclear capacity. By 2035, Ontario will lose its earlier achievement in the electricity sector of an 80 per cent reduction in emissions in 2015 compared to 1990. Emissions by 2035 will rise to double that needed to restore the 80 per cent reduction requirement by 2050.
OSPE recommendations:
- The Ministry of Energy, Northern Development and Mines should implement new regulations where surplus emission-free electricity (interruptible electricity) is priced separately from dependable electricity.
When surplus clean electricity is available, the preferred order of energy use should be:
- Make surplus clean electricity available to Ontario ratepayers for displacing fossil fuels, especially heating oil and propane, used for thermal energy needs.
- Export the balance of the clean surplus electricity that cannot be used in Ontario.
- Curtail any residual amounts that cannot be used either for fossil fuel displacement within Ontario or exported.
The Ministry of Energy, Northern Development and Mines should engage in consultations with appropriate engineering and electricity rate experts on how best to introduce an interruptible retail electricity market. OSPE’s Energy Task Force is currently working on a Retail Electricity Price Reform report and will provide the Ontario government with a number of recommendations regarding a no-cost way to achieve economy-wide emissions reductions in the future.
- The Ministry of Energy, Northern Development and Mines should assemble a team of financial experts to determine how best to replace the Fair Hydro Plan at the end of 2021 with a sustainable asset base that does not impose costs on consumers for past poor planning decisions.
The new asset allocation structure should eliminate cost transfers between rate classes and groups that are currently creating serious cost escalation for larger commercial and smaller industrial consumers.
- The Ministry of Energy, Northern Development and Mines should re-examine its electricity system supply mix plans for the 2025 to 2050 period if it wants to meet the international Intergovernmental Panel on Climate Change (IPCC) targets by 2050.
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ENVIRONMENT
Government announcement:
- Eliminate the Environmental Commissioner of Ontario, the independent officer who reports on government progress on climate change, energy and other environmental issues, and incorporate its mandate under the Ontario Minister of the Environment, Conservation and Parks, and the Attorney General.
OSPE values the importance of an independent office that reports on government progress on climate change, energy and other environmental issues and does not believe that the independent duties performed by the Environmental Commissioner can and will be easily absorbed by the Minister of the Environment, Conservation and Parks, and the Attorney General.
OSPE recommendations:
Reverse the decision to eliminate the Office of the Environmental Commissioner of Ontario. OSPE remains committed to our offer to establish a dialogue with the Ford government to explore whether there are any alternative strategies to responsibly combat climate change and reduce carbon emissions in Ontario. Under the Professional Engineers Act, engineers have a sworn duty to safeguard life, health, property, economic interests, the public welfare, and the environment.
OSPE’s Environment Task Force will be providing input on the made-in-Ontario climate plan that government establishes and will urge the involvement of engineering expertise before decisions are made.
After much research and discussion amongst the Environmental Task Force Members, OSPE believes the effects of climate change will be devastating to society and that solutions must be implemented to both mitigate and adapt to these changes. Furthermore, the development of new technologies, if properly supported by the Ontario Government, can provide an economic benefit to the province (i.e., improved BEVs, HFCEVs, district heating and energy systems, etc.)
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RING OF FIRE
Government announcement:
- Review the Far North Act, 2010, which was enacted to develop land use plans in northern Ontario, establish a Mining Working Group and begin northern transportation improvements to help move people and goods and aid the development of the Ring of Fire.
OSPE recommendations:
The government should include OSPE as part of its Mining Working Group, because Ontario’s Ring of Fire mining region represents a $60 billion multi-generational economic opportunity, and engineers will be involved in almost every facet of this nation-building project. Building on the success of OSPE’s Spark The Fire symposium, where we successfully brought together governments, industry, first nation leaders and engineers to identify options for moving forward, OSPE aims to be a go-to resource for all stakeholders by providing independent engineering expertise. Ontario’s engineers can identify potential solutions to current barriers, including a lack of infrastructure, the high cost of electricity and low commodity prices.
What are your thoughts regarding the 2018 Fall Economic Statement and OSPE’s recommendations? Do you have any further recommendations based on your engineering expertise?
